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The Structure of Constant Elasticity Demand Models
Author(s) -
LaFrance Jeffrey T.
Publication year - 1986
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241539
Subject(s) - economics , elasticity (physics) , constant (computer programming) , constant elasticity of substitution , price elasticity of demand , duality (order theory) , mathematical economics , microeconomics , econometrics , mathematics , elasticity of substitution , computer science , thermodynamics , physics , production (economics) , programming language , discrete mathematics
The demand model with constant price and income elasticities has been used extensively in applied agricultural economics. This paper analyzes the structure of incomplete systems of constant elasticity demand functions. It is demonstrated that there is a duality theory for incomplete demand systems that is analogous to the duality theory for complete systems. This theory permits the recovery of that portion of the direct and indirect preferences pertaining to the goods of interest, and we can calculate exact welfare measures for changes in income and in the prices of these goods. For an incomplete system of constant elasticity demands, the Slutsky symmetry restrictions for integrability are presented and the implied structure of the direct and indirect preferences with respect to the prices and goods of interest is derived.